Online Insurer Breathes New Life Into Market
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by Chris Sapardanis
Japan is a world leader in high-tech innovation, but its life insurance industry has some catching up to do. The traditional method of selling life insurance through agents is regarded by many as inefficient, over-priced and old fashioned. Consumer needs are changing and they want less-complicated products.
Those best positioned to offer a fresh approach to consumers are the same companies that can take advantage of recent deregulation – new companies that aren’t bogged down by legacy processes and paperwork. That’s the plan for a group of seasoned insurance executives and entrepreneurs, who created Lifenet Insurance, Japan’s first independent life insurance company in 74 years.
Lifenet is one of only two Internet-based life insurance companies in the country. The startup began in 2008 with $130 million in venture capital and looks to chip away at major carriers’ market share by offering simplified life insurance products.
For Vice President Daisuke Iwase, the founding of his company comes at a perfect time. He says premiums for comparable coverage in Japan are up to three times higher than in the U.S. or Europe. And the country’s “exclusive” agents are not providing customers with enough relevant and competitive information to make decisions.
The Harvard Business School grad believes distributing life insurance directly over the Internet will solve many issues in the Japanese market. He recently discussed the insurance sector in Japan and how Lifenet benefits from working with our company.
What are your biggest challenges?
IWASE: Our business model seems very simple but everyone has been skeptical from the start about selling life insurance over the Web. While a lot of other financial markets have gone online, such as banking, brokerage, auto insurance, etc., for one reason or another that direct model has not applied to life insurance.
In addition to our initial challenge to raise enough money to start the business, we continue to confront the general consumer perception that life insurance needs to be bought face to face. Another challenge was getting licenses from the Japanese government. The last time a purely independent insurer (not a subsidiary of foreign or general insurance firms) was awarded a new license was in 1934.
After we got up and running, another major challenge was how to get known to the public. It’s very difficult to raise awareness unless you spend lots of money on marketing. But we couldn’t spend much because the whole idea was to cut costs.
How does CSC help you?
IWASE: At the end of the day, good products and services prevail. When we designed our products, they had to be inexpensive. We realized this by really thinking through the business processes and IT systems architecture and eliminating all the various expensive and complex features that traditional life insurance products have.
We’re using CSC’s package software called LIFE/J. By depending on CSC for our customer management system we can really focus on the Web interface and our internal work flow process that helps us accomplish a consumeroriented and innovative approach.
In the beginning, we had a very short timeframe to meet our go-to-market target. We started an IT development project in August 2007 and were in business by May 2008. So we really had a limited amount of time to not only build a base system, but also the Web interface, which is the heart of the customer experience.
We needed a solution that could get up and running very quickly and had a good track record within the market. LIFE/J is almost a standard or ‘de facto’ application in the market among our peers. Many of our colleagues had joined us from our competitors and they were familiar with CSC and its software package and had good things to say about it.
From our perspective, in the Japanese market, working with CSC was the right decision for us and we’ve been very happy with the experience.
What are your company’s growth plans?
IWASE: There will be opportunities to introduce new products and distribution channels and move into international markets. We believe in this online insurance model and in mobile insurance as well. We’re very excited about looking to expand into international markets and we believe there’s huge potential for emerging markets to leverage the Internet.
If you think about telecommunications companies, in many emerging countries they have bypassed building out landline communications and moved directly to mobile (wireless). It’s similar in big countries like China or India where we could avoid establishing a physical sales agency network and go directly online or mobile and really rationalize that sales process. We’re excited about those opportunities.
How can IT improve your business in the future?
IWASE: The life insurance industry is very labor intensive and faces challenges in increasing speed and customer satisfaction. In our case, the customer directly inputs their information on the Web and all that comes in directly to the system and is digitized. That saves so much cost, ensures accuracy, and customers don’t have to wait for paper copies. They can directly access our Web site and their data and make changes if they need to.
In the case of the finance industry, all their products are very tangible so in a way finance companies can potentially rationalize business processes using IT. But because insurance is a longterm contract, it will be difficult for existing insurers to move everything online. They have existing contracts that go back five to 30 years that they have to administer using conventional paper processes.
I’m not saying everything should be digitized because there’s a lot of value to the “human touch” aspect of the business. But managers can still look at the high value add of online processes to at least eliminate costly administrative work.
Chris Sapardanis is a senior writer for CSC’s corporate office.